Nothing about WeWork has been exactly normal. If you follow the ups and downs this company has taken over the years, no news would really surprise you, and the same goes with this latest revelation: the company losing $2.1 billion.
But keep in mind, this is WeWork, the same company that was once run by wild man Adam Neumann and still survived. So this latest announcement is probably not a big deal in the grand scheme of things. And kudos to WeWork. Not too many companies can claim they're still all right after losing so much. But WeWork can. Find out why.
WeWork is well-positioned
WeWork is well-positioned to not only bounce back now that the pandemic is waning but to come on stronger than ever. Before the pandemic, co-working and flex space were good options. But after? They're great options. The co-working/flex space arena, in which WeWork operates, might be the setup many workers seek.
And indeed, executive chairman at WeWork Marcelo Claure said at a Bloomberg conference that customer demand is now not only back to pre-pandemic levels, it's exceeding it.
WeWork has plenty of vacancies now, but it's enlisted the help of heavy-hitter Jones Lang LaSalle (JLL) (NYSE: JLL) to help fill them. WeWork, a one-time reckless company run by a man with a God complex, looks like it's being run correctly now.
WeWork's loss of over $2 billion in the first quarter of 2021 is attributed partly to the same reason for almost every business' financial difficulties of late: the coronavirus pandemic. In WeWork's case, it was that and the payoff (settlement) to Neumann of almost half a billion of that $2 billion loss -- a loss nearly four times more than WeWork's loss from last year at this time.
The new plans
WeWork is now rid of Neumann for good (with 500 million reasons why) and is now run by Sandeep Mathrani, who is acting as WeWork's chief executive officer. Instead of trying to change the world, WeWork is now focusing on its core business -- renting office space. There's currently a commitment by customers of $1.9 billion to WeWork.
More exciting news for WeWork is a merger with BowX Acquisition, a special purpose acquisition company (SPAC) affiliated with Vivek Ranadive, owner of the Sacramento Kings. With this merger, WeWork will try for a second time to go public after its first failed attempt in 2019 under Neumann. The initial valuation is to be $9 billion. The merger with BowX will provide a cash infusion to WeWork of $1.3 billion to fund growth.
At the same time WeWork's been growing, it's also been actively cost cutting. Since the 2019 fiasco, WeWork has laid off 2,400 employees (the millennial work buddies who were known for starting to party at 4 p.m.) and reduced its total workforce by 67%. It also arranged to get out of 100 leases at spaces that were underperforming and arranged for another 100 lease amendments to benefit WeWork.
The Millionacres bottom line
The co-working industry faltered during the coronavirus pandemic as people were social distancing and working from home. But now that the pandemic is waning, people are returning to civilization once again, armed with the knowledge that they can work effectively from other places besides the main office. It's this climate that bodes well for the co-working part of commercial real estate -- and might be the perfect chance for a company like WeWork, a company that's now serious with a refocused mission under new management.